DCF Studio

    GWW · NYQ · Industrials

    W.W. Grainger, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 778.21

    Market price

    USD 1377.66

    Implied upside

    -43.5%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    AdjustedCapital expenditure runs at 2.8% of revenue against depreciation of 1.4%. A perpetuity has to be a steady state, so the forecast tapers capex to maintenance at depreciation plus the reinvestment terminal growth requires (g/ROIC of NOPAT), and the terminal year carries on from there. The bridge is shown under Terminal Value.

    Current EV/EBITDA of 24.4x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 778.21-43.5%
    Exit multiple
    USD 1190.18-13.6%
    Market price
    USD 1377.66

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn3bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 19.7bnUSD 21.1bnUSD 22.5bnUSD 23.8bnUSD 25.1bnUSD 26.3bnUSD 27.4bnUSD 28.4bnUSD 29.3bnUSD 30.0bn+4.8%
    EBITUSD 2.9bnUSD 3.1bnUSD 3.3bnUSD 3.5bnUSD 3.7bnUSD 3.9bnUSD 4.1bnUSD 4.2bnUSD 4.4bnUSD 4.5bn+4.8%
    NOPATUSD 2.3bnUSD 2.5bnUSD 2.6bnUSD 2.8bnUSD 2.9bnUSD 3.1bnUSD 3.2bnUSD 3.3bnUSD 3.4bnUSD 3.5bn+4.8%
    Add depreciation & amortisationUSD 267.6mUSD 286.7mUSD 305.6mUSD 323.9mUSD 341.4mUSD 357.9mUSD 373.1mUSD 386.7mUSD 398.7mUSD 408.6m+4.8%
    Less capital expenditureUSD -557.9mUSD -582.7mUSD -604.8mUSD -624.0mUSD -639.7mUSD -651.7mUSD -659.6mUSD -663.4mUSD -662.7mUSD -657.7m+1.8%
    Capex, % of revenue2.8%2.8%2.7%2.6%2.5%2.5%2.4%2.3%2.3%2.2%-
    Less increase in working capitalUSD -364.7mUSD -297.2mUSD -292.6mUSD -284.2mUSD -272.0mUSD -255.8mUSD -235.9mUSD -212.2mUSD -185.0mUSD -154.7m-9.1%
    Free cashflow to firmUSD 1.7bnUSD 1.9bnUSD 2.0bnUSD 2.2bnUSD 2.4bnUSD 2.5bnUSD 2.7bnUSD 2.8bnUSD 3.0bnUSD 3.1bn+7.3%
    Discount factor0.95870.88120.81000.74460.68440.62910.57820.53150.48850.4490-
    Present valueUSD 1.6bnUSD 1.7bnUSD 1.7bnUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.6bnUSD 1.5bnUSD 1.5bnUSD 1.4bn-
    Present Value Of The ForecastUSD 15.7bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta0.970Reported 0.955, pulled toward 1.0 (Blume)
    Cost of equity9.00%Risk-free + beta x equity risk premium
    Cost of debt5.29%Risk-free + 40bp, the spread for a AAA rating at 30.8x interest cover. Book interest / average debt was lower, at 2.7%.
    Market capitalisationUSD 64.9bn95.8% of capital
    Total debtUSD 2.9bn4.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC8.79%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 778.21

    60% of EV

    Forecast FCFF, final year
    USD 3.1bn
    Capex at depreciation, working capital in reinvestment
    USD 3.5bn
    Less reinvestment at g/ROIC (7.1% of NOPAT)
    USD -249.1m
    Capitalised
    USD 3.3bn
    ROIC (reported)
    35.4%
    Terminal value, undiscounted
    USD 53.3bn
    Terminal value, discounted
    USD 23.9bn
    Enterprise value
    USD 39.6bn
    Less net debt
    USD 2.3bn
    Equity value
    USD 37.4bn

    Exit at 20.0x EBITDA

    Value per shareUSD 1190.18

    74% of EV

    Terminal value, undiscounted
    USD 97.4bn
    Terminal value, discounted
    USD 43.7bn
    Enterprise value
    USD 59.4bn
    Less net debt
    USD 2.3bn
    Equity value
    USD 57.1bn

    Spread between methods: 42%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.79%1038.661103.031182.971284.631417.92
    7.79%855.89895.02941.99999.241070.37
    8.79%723.93748.91778.21812.95854.67
    9.79%624.36640.82659.83681.95707.91
    10.79%546.67557.75570.40584.92601.72

    Outlined: this model. Green text: above today's price of 1377.66. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year5.6%5.3%12.4%
    EBIT margin15.6%14.8%24.8%
    Discount rate-8.8%6.2%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.